The Austrian multinational has been testing the Indian market for setting up a subsidiary for some time now. The buyout of Indal Electronics, one of India's largest printed circuit board (PCB) exporters with focus on telecom, data communication and industrial electronics, will mark its entry in India.

Indal insiders remained tightlipped on the details of the sell-off but confirmed that the divestment will fetch the company well over Rs 50 crore. A formal announcement in this regard is expected from Indal soon, they said.

Indal did not seek the help of any independent valuer or merchant banker for the deal, the sources said. The electronics subsidiary has an equity base of Rs 38.36 crore.

Indal insiders said its board feltthat the company's core strength lies in the aluminium business and only an electronics company could chart out a proper growth plan for the electronics subsidiary.

Being in the electronics business also does not fit into Alcan's global strategy. The Canadian major, after increasing its stake by 20 per cent, intends to have a greater say in the functioning of Indal.

The electronics business, located at Nanjangud in Karnataka, was earlier a division of Indal and was hived off into a separate wholly-owned subsidiary in 1996 under RC Sarangi, the then division head.

Indal Electronics has an installed capacity of 80,000 sq meters of PCBs, which will increase to 100,000 sq meters by the end of the current fiscal, and has been operating at 105 per cent capacity utilisation in 1997-98.

Exports, which shot up by 46 per cent over the previous year, accounted for over 40 per cent of its turnover of Rs 74.59 crore in 1997-98. Its net sales, over 1996-97, has increased 46 per cent while profit after tax at Rs 7.5crore has jumped by 192 per cent. It paid a dividend of 20 per cent.

In the first quarter of the current fiscal, Indal Electronics has logged a 22 per cent growth in turnover and a 83 per cent jump in net profit. Its customers include US Robotics, Honeywell, 3 Com and Alcatel, among others.

It is learnt that AT&S had been shortlisted along with three other electronics companies, which also included a non-resident Indian-promoted company. The sale to AT&S is subject to several clearances including that from the FIPB for the Austrian company.

Indal's core business of aluminium has suffered in recent years due to shortage of power and an adverse import duty structure. It is believed to be on the verge of finalising its power supply requirement with Jindal Tractable.

The arrangement will enable Indal to re-energise part of its smelter in Belgaum, Karnataka, and produce 25,000 tonne of primary aluminium which will reduce the company's dependence of costlier imports.

INSIGHT
Move will bolsterbottomline

Indal's move to divest non-core businesses and the consequent sellout of Indal Electronics, was only to be expected, now that Alcan holds a majority 54.6 per cent stake in Indal. The move would be good for Indal's cash flows, given that the company will receive a consideration in excess of Rs 50 crore. Given the diminutive size of the operations at Indal Electronics (net profit of Rs 7.5 crore) the one time payoff, is much more than the annual dividend payouts received by Indal.

The one-off revenue should help Indal fund its projects, primary amongst which is the doubling of smelter capacity at Hirakud, Orissa, and the increase in alumina capacities at Belgaum, Karnataka, and Muri, Bihar. More importantly with aluminium prices continuing to remain low in the $1,300 per tonne levels, the one-off revenue should help bolster the bottomline for Indal.